Major Markets on Subdued Action over Investor Caution

FEDMarket turned dovish despite positive opening as investors turned cautious ahead of key political and economic events scheduled across the week which in erasing a significant part of gains made last Friday.

Summary: Global market is seeing subdued price action in all major markets as investor sentiment has turned cautious ahead of key political events scheduled across the week. Equity market is seeing sharp declines in all major exchanges across the globe while forex market is seeing mixed price action. Despite opening positive on cues from US Wall Street and news of temporary reopening of US government, market saw price action turn risk averse as investors held back from placing major bets and decided to book profits ahead of tomorrow’s UK parliament Brexit Plan B vote and upcoming high level Sino-U.S. trade talks in Washington. The week also US Fed Monetary policy committee update where members are expected to officially comment on Fed’s plans to stop shrinking their balance sheet and terminate rate hike plans for 2019. News of US Fed members deciding to keep balance sheet at current levels hit market last Friday and triggered a broad market sell-off of USD which is now viewed by many as sign that Fed members could end their ongoing rate hike cycle instead of delaying rate hike plans for 2019 as announced earlier.

Precious Metals: Precious metals held their position steady near session highs and were on a consolidative action in European session helped by weak USD in broad market and cautious investor sentiment ahead of key political events which has resulted in sustained safe haven demand. This provided yellow metal the momentum needed to breach $1300 level and hit 7 month highs while Silver hit 3 week highs in spot market.

AUD/USD: Australian dollar is trading with slight bearish bias in European trading session as cautious investor sentiment resulted in the pair failing to establish a steady momentum above 0.72 price handle. However broad based USD weakness and risk appetite helped the pair hit 10-day high earlier in the day and the pair still continues to trade near 7-day highs. Investor focus has shifted towards Sino-U.S. trade talks later this week which is expected to keep the pair locked in a range bound action.

USD/JPY: The pair for now seems to be in consolidative action as both sides lack trigger to make breakout. Broad based USD weakness despite prevalent risk appetite is expected to keep the pair in range bound action across the week as high impact headlines on critical political events and high impact macro data are expected to keep risky assets highly active and volatile across the week. While some level of investor cautious is expected to support Japanese Yen, demand for Yen is relatively low at the moment resulting in both sides of pair lacking strength to gain upper hand.

Brexit No dealOn The Lookout: Immediate focus of investors is on speech by ECB President Mario Draghi & BOE Governor Mark Carney later in the day for short term directional cues ahead of much awaited PM May’s Brexit Plan B vote in UK parliament session tomorrow. The event is set to be followed by high level trade talks between China & U.S. in Washington later this week. News driven action is expected to keep market highly active across the week but price action is expected to continue subdued action in near future ahead of Tomorrow’s UK parliament meeting. US FOMC meeting later in the week is also eyed as outcome will help set course of medium term price action in major forex assets. Futures data in international market trades in red which suggests that US Wall Street is likely to see range bound action with bearish bias.

Trading Perspective: Market is expected to continue experiencing subdued price action as activity remains high but most major assets have displayed lack of major bets owing to cautious investor stance. Short term bias in market is neutral with slight leaning in bearish territory as trading heads into American market hours.

EUR/USD: The pair continues to trade steady above 1.14 handle having hit 2-week high earlier in the day but remains capped at mid-1.14 handle owing to EURO bulls’ lack of fundamental support. Broad based US dollar price dynamics will continue to dictate momentum in immediate and near future trading session. Meanwhile ECB Draghi reiterating recent dovish comments during his speech later today will push the pair back near 1.14 handle.

GBP/USD: Investor caution in broad market ahead of tomorrow’s Brexit Plan B vote in UK parliament has caused the pair to move down from recent highs. The pair fell from 1.32 handle during late Asian hours and has continued steady decline across London trading hours but the downside action is likely to be capped ahead of BOE Governor Mark Carney’s speech later in the day. Further optimism on headlines that PM May has ruled out No-deal scenario is also expected to limit GBP’s loss beyond 1.31 handle.

USD/CAD: The pair hit 3-week low earlier in the day supported by broad based USD weakness in broad market. But Canadian Loonie lacked the strength to sustain momentum on near intra-day lows owing to sharp decline in crude oil price in broad market. The pair is expected to move range bound ahead of US Fed MPC update and Sino-U.S. trade talks which are expected to provide direction cues for the pair’s medium to long term price action.